Why are interest rates so low? • Hacker News Board

Re: Why are interest rates so low?

#221

Post by gmays » Tue, Mar 31, 2015, 12:25 PM UTC

collyw wrote: post #90

enraged_camel wrote: post #73

Earlier quoted context omitted.

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

I have discussed this with friends recently. Why do we need growth? I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices). I would quite like to relax and coast a bit in life, but with the constant chasing of growth by everyone else, standing still means you will get left behind (i.e…

> I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices).

I'd be careful not to confuse the limits of your imagination with the limits of reality.

I've seen this sentiment many times in many different ways and it has never been accurate. It's easy to feel like now is different and we've never been here before, but we have. The key isn't that you don't need a faster iPhone or faster computer, it's that you need them. There will always be another iPhone/computer, whatever that will be.

Re: Why are interest rates so low?

#222

Post by ci5er » Tue, Mar 31, 2015, 1:01 PM UTC

colund wrote: post #6

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population…

> In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high

To which I say: Good for you!

> Why the obsession of economic growth?

There are many reasons. Here is one:

http://ourworldindata.org/data/growth-and-distribution-of-pr...

Our work is not here done. Except, maybe in Sweden.

Re: Why are interest rates so low?

#223

Post by msandford » Tue, Mar 31, 2015, 2:30 PM UTC

ctl wrote: post #157

msandford wrote: post #94

Earlier quoted context omitted.

Hasn't Japan been printing tremendous amounts of money to try and prevent it, with no end in sight? At what point does that get discredited?

That's exactly why it's called a deflationary spiral: once you're in it, it's hard to get out even with aggressive monetary policy.

Maybe the problem is that they're trying to hold asset prices up at a completely bananas level. And because it's such a crazy high level, the only way people will hold them is constant money printing.

Perhaps letting the prices return to levels that are based on fundamentals instead of constant printing would solve the problem. There's no guarantee it becomes a spiral, especially if the deflation is mild.

Mild deflation with zero interest rates is roughly the same as zero inflation with slightly higher rates or mild inflation and moderate interest rates. There's very little technical difference between the three so long as the delta is only 2% or so.

In other words, the world wouldn't grind to a halt with 2% deflation. It's 20% deflation that causes the spiral, not 2%. Unless of course you're so heavily financialized that 2% makes all your models blow up and your banking sector is so entrenched in and around the government that they can hold an entire country -- if not the world -- hostage.

Re: Why are interest rates so low?

#224

Post by josephlord » Tue, Mar 31, 2015, 3:28 PM UTC

josephlord wrote: post #191

twobits wrote: post #98

Earlier quoted context omitted.

"Why the obsession of economic growth?" Because central banks (CB) print money out of thin air. That "money" is debt. You print 100, you owe 110 counting interest. How can you pay the 10, if you only printed/exists, 100? You can't. You, me, everyone, is a debt slave. "Times are good" = CBs print a lot of money (out of thin air). A lot of non existant interest too, but you don't notice, cause more money/debt is printe…

All banks create money out of thin air when they make loans not just central banks. And your arithmetic doesn't quite work either at the very least if you assume that money actually gets respect with a certain speed. http://www.forbes.com/sites/stevekeen/2015/03/30/the-princip...

for "respect" read "respent"

Re: Why are interest rates so low?

#225

Post by colund » Tue, Mar 31, 2015, 3:44 PM UTC

jseliger wrote: post #25

colund wrote: post #6

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population…

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine t…

Amazingly well written replies everyone! Wonderful community!

I agree that the economy might not be "big enough" yet. And yes I agree that we need more progress and probably more growth. But do we need to be in a hurry?

It surprises me that none of the commenters has mentioned global warming - a side effect of economic growth.

So, what do HN readers think about the correlation between economic growth and global warming? Should monetary policy not bother about including global warming side effects due to increased co2 pollution due to economic growth into their economics equations?

Re: Why are interest rates so low?

#226

Post by chonoo » Tue, Mar 31, 2015, 5:12 PM UTC

colund wrote: post #225

jseliger wrote: post #25

Earlier quoted context omitted.

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine t…

Amazingly well written replies everyone! Wonderful community! I agree that the economy might not be "big enough" yet. And yes I agree that we need more progress and probably more growth. But do we need to be in a hurry? It surprises me that none of the commenters has mentioned global warming - a side effect of economic growth. So, what do HN readers think about the correlation between economic growth and global warmi…

What you are grappling with here is not "have we got a big enough economy". Global Warming does not come from value creation, or the statistical proxy that we call Economic Growth. It comes from burning fossile fuels.

In terms of value, what we have learnt from the last two decades is that a few people with computers can create a lot of it, with negligible impact on our planetary ecosystem. Clearly it makes our lives easier, and gives us more "stuff".

However, our physical existence still depends on fossilised energy to an alarming extent, and policymakers are still unable to wean us off it (witness the fuel subsidy debates in Egypy and Indonesia), or simply unwilling to. You can even say that we use so much of it due to lack of effort, i.e. an unwillingness to actually grow the economy enough by finding substitutes. Because that would involve people doing more work to learn the right technical skills, and that's unreasonable to demand, right?

In fact, it might lower the environmental inpact, since an app with driving directions can make our car journeys more efficient.

Re: Why are interest rates so low?

#227

Post by siculars » Tue, Mar 31, 2015, 5:33 PM UTC

enraged_camel wrote: post #73

jseliger wrote: post #25

Earlier quoted context omitted.

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine t…

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

I donn't think that is actually the case. You may think, and I might have agreed with you, that at first blush building yet another insipid shopping mall does not necessarily yield any enhancement to society but after further thought I would tend to disagree. The "market" is where society comes together to mingle and it is also where goods and services are presented to the people who may not have had an avenue to receive them previously. The modern day mall is the modern day town square market of yesteryear. It is yet another avenue for ideas to germinate and goods to be exchanged. Someone will buy something that allows them to free up time which will allow them to spend more time thinking about something new or caring for someone who will think of something new.

Expansion is the only way forward and often everything can be measured in economic output.

Re: Why are interest rates so low?

#228

Post by gcb0 » Tue, Mar 31, 2015, 5:58 PM UTC

jseliger wrote: post #25

colund wrote: post #6

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population…

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine t…

sorry to sound like the hippie, but doesn't the official metric is mostly influenced by monetary institutions? which generate none of your grandiose example (science, production, etc)

Re: Why are interest rates so low?

#229

Post by cm127 » Tue, Mar 31, 2015, 6:20 PM UTC

randyrand wrote: post #167

twobits wrote: post #98

Earlier quoted context omitted.

"Why the obsession of economic growth?" Because central banks (CB) print money out of thin air. That "money" is debt. You print 100, you owe 110 counting interest. How can you pay the 10, if you only printed/exists, 100? You can't. You, me, everyone, is a debt slave. "Times are good" = CBs print a lot of money (out of thin air). A lot of non existant interest too, but you don't notice, cause more money/debt is printe…

Also because growth improves lives. In 1800 if your child contracted polio he would die, now they live. If you don't think technology and growth make lives better, then HN might not be the most like minded community for you.

That's a trite comparison. Why not include pollution and global warming?

Re: Why are interest rates so low?

#230

Post by jedharris » Tue, Mar 31, 2015, 6:50 PM UTC

colund wrote: post #6

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population…

There are two very different senses of "growth" here.

The good sense is that better ways of doing things is "growth" -- for example cheaper more efficient solar panels can slow global warming, reduce centralized power, etc.

The bad sense is increased GDP, more stuff, etc. There's no strong reason good growth has to produce bad growth. We can decouple them.